Questions to Ask Before Buying Life Insurance

The life insurance sector in India has grown by leaps and bounds over the past two decades. New products have been introduced, existing products have been enhanced, and interested policy buyers have a variety of features to choose from today. For first-time buyers and for beginners to the world of insurance, making a purchase decision can get overwhelming.

If you find yourself in a similar situation, it can help if you get all your doubts and queries clarified before you go shopping for life insurance. So, here are some important questions to ask before you buy your life cover, and of course, the answers to those questions as well.

Check them out before you go ahead and purchase your life insurance plan.

This is the most fundamental question for every interested life insurance buyer. Simply put, the size of the life cover that you choose should be adequate for your family's financial needs. This amount may vary from one person to another. Someone who has only one dependent family member may need lower coverage than someone with multiple dependent family members.

To identify the right amount of life insurance coverage for your needs and your family's, the sum assured under the life insurance plan should account for the following:

• Your family's everyday expenses


• Their major emergency expenses


• Any debts or liabilities in your name


• The cost of the major life goals and milestones


• Inflation and the rising costs of living it brings

There are life insurance policies that offer coverage for around 20 years or so, and there are plans that cover you for the whole of your life, up to the age of 99 or 100. So, what is the ideal policy term for you?

Experts generally recommend that your life insurance plan should cover you till you attain your retirement age, at the very least. This is because in case something untoward happens before you retire, your family will have the financial protection of the life insurance plan to rely on. So, the policy term will depend on your age at the time of purchase. The table below explains this better.

Your age at the time of purchase	Minimum recommended policy term
Below 25 years	35 to 40 years
25 to 30 years	30 to 35 years
31 to 35 years	25 to 30 years
36 to 40 years	20 to 25 years
41 to 45 years	15 to 20 years
46 to 50 years	10 to 15 years
Above 50 years	At least 10 years

However, this is just one option. You can also choose a life insurance plan that offers longer coverage, perhaps till the age of 80 or 85, or even whole life coverage, which goes up to the age of 99 or 100. This would be better suited for you if you do not have a lot of other investments to rely on, or if you want to provide your family additional protection. Do keep in mind that longer coverage also comes with a higher premium.

Well, that depends on your specific needs and requirements. But here's a quick capsule guide to help you decide.

Type of life insurance plan	Choose this type if:
Term life insurance plan	You work in a high-risk job and want the most affordable life cover available, or you want to lay the foundation for your family's financial security at a nominal cost
Term plan with Return of Premium	There is a high likelihood you will survive the policy term, so you can receive your premiums back
Savings plan	You want to save up for life's major milestones
Unit Linked Insurance Plan	You want to combine the benefits of insurance and investment
Retirement or annuity plan	You want to set up an alternative or additional source of income during your retirement years

Just like it is important to choose the right kind of life insurance plan, it is also important to choose a reliable insurer. Before you zero in on a plan, ensure that the life insurance company you choose has a high claim settlement ratio (CSR).

This is simply the ratio of the claims the company receives to the claims it settles. A higher CSR indicates better chances of your insurance claim or your family's claim being settled - as the case may be. In addition to this, you also need to look at the following factors:

• The insurer's financial strength


• Their customer service and support


• The reviews of their existing customers


• The solvency ratio of the insurer

This is another important question to ask before you make your purchase. Essentially, there are two kinds of premium payment terms to choose from.

• Regular premium payment:Here, you pay your premiums over the entire policy term. So, if you opt for a policy that gives you a life cover for 30 years, you have to pay premiums for all those 30 years.


• Limited premium payment: Here, the premium payment term is shorter than the policy term. For example, if you opt for a policy that gives you a life cover for 30 years, you may have to pay premiums for a period less than 30 years. This period varies from one plan to another.
  
  In the case of regular premium payment terms, the premium instalment is lower than it is in limited premium payment terms. So, you can make your choice based on your financial condition.

Add-on riders help enhance the protection offered by your life insurance plan. There are different life insurance riders that you can choose from. Not all policies offer riders though. So, check if the plan you are looking at gives you any add-on rider choices. For example, the ABSLI Vision LifeIncome Plus Plan allows you to choose from 5 different riders.

If you wish to extend the coverage offered by your plan to specific, need-based incidents like a critical illness diagnosis, accidental death or disability, or a surgery, you can choose to purchase a rider as well. In exchange for this, a small additional premium is added to the cost of your base plan.

When you purchase a life insurance policy, either a part of the coverage or all of it may not come into effect immediately. In some cases, you need to wait for a brief period of time, like 30 days or 90 days, for the coverage benefits to come into effect. This is what we call the waiting period.

In the ABSLI DigiShield Plan, for instance, the Accelerated Critical Illness (ACI) Benefit has a waiting period of 90 days.

So, before you buy a life insurance plan, check out the waiting period it has, if any.

This is something every life insurance policyholder worries about at some point. So, it's best to get this query clarified right at the start. If you forget to make a premium payment when it is due, your policy does not immediately lapse. Life insurance service providers give you a grace period - generally 30 days or so.

During this period, you can still make the premium payment along with a nominal penalty for the delay. However, if you fail to pay the premium even during the grace period, the policy lapses, and you lose the coverage and all the other benefits that it offered you.

Bottom line - it pays to pay your premium on time.

Last words

As it is evident from the questionnaire above, there are a lot of things that you need to be clear about before you make the big decision to buy a life insurance plan. Don't hesitate to seek expert help if you need it. After all, buying a life cover is a major financial choice, and it is one that you should definitely not rush through. That said, take care not to put off buying life insurance until much later in life, either.